Assume a firm uses two inputs, capital and labor. All else constant, a
Assume a firm uses two inputs, capital and labor. All else constant, an increase in the price of labor would create an incentive for the firm to:
A) substitute labor for capital in its production function.
B) substitute capital for labor in its production function.
C) hire more capital and labor.
D) hire less capital while holding the amount of labor employed constant.
ANSWER
B
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